LAUNCH OF INSURANCE

FRAUD INVESTIGATION UNIT

(a partnership between IRA and the Kenya Police)

Introduction
The Insurance Regulatory Authority (IRA) is
mandated with regulating, supervising and
developing the insurance industry in Kenya.
The Authority is also mandated to protect
the interests of policy holders, insurance
beneficiaries and the public. This mandate
is executed through a combination of legal
and regulatory measures and is aimed at not
only ensuring industry stability and market
confidence but also spurring growth.

Fraud in the Insurance

Industry
IRA is alive
to this
recognition
and one of
the measures
for mitigating
the effects
of insurance
fraud is the
establishment
of an
insurance
fraud
investigation
unit.

Despite the focus on maintaining

industry stability and growth, it is
also recognized that the insurance
industry continues to suffer negative
public perception and image. This
reputational risk has been partly
attributed to the effects of fraud
and other malpractices afflicting the
insurance industry.
Insurance
fraud
remains
a
complex and most significant risk
affecting operations of insurers
and intermediaries. Its pervasive
nature as white collar crime implies
that its elimination is bound
to be an odious and expensive

Acting Minister for Finance Hon. Robinson Njeru Githae lauching the Insurance Fraud Investigation Unit.

undertaking. It is an externality
to
policyholders,
insurance
beneficiaries and the general
public with its interconnectedness
costing insurance consumers and
the business community in Kenya
millions of shillings each year in
direct and indirect costs.
IRA is alive to this recognition and

one of the measures for mitigating

the effects of insurance fraud is the
establishment of an insurance fraud
investigation unit. This is because
insurance fraud increases the cost
of doing business, places businesses
at risk and is a leading cause of
insurance company insolvencies.
It also reduces consumers ability
to raise their standard of living due

Other players in
the fraud chain are
policyholders, thirdparty claimants and
professionals.
to high cost of accessing insurance
services in addition to decreasing the
economic potential of the country.
Whereas focus on fraud in the
insurance industry has tended to
expend energy and resources on
claims management, it is generally
recognized that fraud transcends
the ambit of claims administration
to involve shareholders, Boards of
Directors, Management and staff.
Other players in the fraud chain
are
policyholders,
third-party
claimants and professionals. Their
actions of knowingly providing
false, incomplete or misleading
information to an insurer for
purposes of defrauding often
leads to cash flow problems for the
affected insurance companies.

Commissioner of Insurance and CEO of IRA Mr. Sammy Makove adressing guests during the launch of the Insurance Fraud Investigation Unit.

The Authority therefore considers

such incidences as being out
rightly criminal in nature. They
constitute some of the reasons that
have contributed to the negative
perception of the insurance industry
by the public; hence the need for
operationalization of an Insurance
Investigations Fraud Unit.

LAUNCH OF INSURANCE
FRAUD INVESTIGATION UNIT

(a partnership between IRA and the Kenya Police)

Insurance Fraud
Defined
Fraud is defined as willful
misrepresentation of the truth
with intent to deceive by one
party resulting in actual or
potential loss to another party.
The International Association of
Insurance Supervisors (IAIS) in a
guidance paper on preventing,
detecting and remedying fraud
in insurance defines insurance
fraud as an act of omission
or commission intended to
gain dishonest advantage for
a party (fraudster) or other
parties. This could be achieved,
for example, by:
i. Misappropriating assets;
ii. Deliberately
misrepresenting,
concealing, suppressing
or not disclosing material
facts relevant to a financial
decision, transaction or
perception of an insurers
status;
iii. Abusing responsibility,
a position of trust or a
fiduciary responsibility

Rationale for
Insurance Fraud
Investigation Unit
Ethical and integrity concerns
continue to be raised on the
insurance industry given that
many players are involved in the
insurance fraud supply chain.
Their conflicting interests show
that insurance fraud has many
portals and eliminating it may
be complex, pervasive and
expensive.
There is need therefore for a
well structured framework for
determining risk exposure levels
of the industry to fraud as well
as determining its impact not
only on the financial sector but
more significantly to the national
economy.
Fraud affects insurers profitability
and potentially deals a heavy
blow to their financial soundness.
To compensate for any arising
financing gaps, insurers often
resort to increasing premiums

whose cumulative effect is

higher insurance access costs
directly or indirectly for insurance
consumers.
Fraud can also affect consumer
and shareholder confidence,
the reputation of the insurer,
or intermediary, the reputation
of the insurance industry and
potentially the reputation of the
regulator.

Functions of the
Unit
Key functional areas
i. Investigations
a. Receiving and verifying
reports from the report
centre
b. Reasonably investigate
leads or opportunities
brought to the Unit
through referrals
c. Interview witnesses
d. Collect documentation
and exhibits
e. Document examination
f. Interview suspects
g. Make arrests
h. Charge suspects in
accordance with the law
i. Make reports on levels of/
progress on investigations
j. Conduct operations
k. Fraud awareness
(preventive services)
l. Advice management on
ways of mitigating fraud
ii. Intelligence
a. Conduct proper and fit
tests
b. Profile fraudsters
c. Surveillance
d. Management of fraud
intelligence data
iii. Data/Report Centre and
Registry
a. Receiving complaints/
reports
b. Keeping of records
c. Dispatching of case files to
court
d. Customer care desk
Any cases of insurance fraud or
suspected insurance fraud should
be reported to the Unit.

Executive Director of Association of Kenya Insurers (AKI) Mr. Tom Gichuhi (left) and Mr. Tom Mulwa Chairman
Association of Insurance Brokers of Kenya (AIBK) prepare to sign the visitors at the launch.

Partnership and
Collaboration
In discharge of its duties, the Unit
will be expected to work closely
and collaboratively with various
institutions such as;
iv.
v.
vi.
vii.
viii.
ix.
x.
xi.
xii.

Law Enforcement Agencies,

Anti Fraud Agencies,
Insurance Companies,
Insurance Industry
Associations,
Public Sector Agencies,
Policy Holders,
Insurance Intermediaries
Insurance Beneficiaries and
Members of the Public.

Office and Location

Currently, the Unit is manned
by 9 police officers, deployed
from the Criminal Investigation
Department (CID). The officers
have been taken through an
induction training programme to
enhance their understanding of
insurance matters.

Currently,
the Unit is
manned by 9
police officers,
deployed from
the Criminal
Investigation
Department
(CID).
So far, the Unit has
detected
several
fraudulent
practices
which are actively
under
investigation.
It has also forwarded
cases for prosecution
and as at today, we
have four insurance
cases in various courts
in the country.

The Unit is temporarily housed at Zep-re Place, 10th

floor (Upper Hill, Longonot Road). Upon completion
of partition works, the Unit will move to ShelterAfrique Building (Upper Hill, Longonot Road). The
Unit can be reached on the following numbers:
572 503 249 (Orange)
0707 598 455 (Safaricom)
0786 598 455 (Airtel)

Chairman of the IRA Board of Directors

Mr. Steve Mainda leads the Acting
Minister for Finance Hon. Robinson Njeru
Githae to the venue of the launch of the
Insurance Fraud Investigation Unit.

Police spokesman representing

Commisioner of Police Mr. Mathew Iteere
addressing guests at the launch of the
Insurance Fraud Investigation Unit.